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On tax returns and direct deposit forms you fill out your bank's routing number, your account number, then tick a box for checking or savings. How important is checking the right box, however? At my bank, savings and checking accounts have different numbers, so the box seems redundant.

Are transfers to/from savings and checking accounts processed differently? Do some banks use the same account number for savings and checking, necessitating this box?

I ask because I ticked savings and wrote down my checking number on my tax returns. I corrected this, but would it have mattered?

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    Once upon a time, banks offered checking accounts and passbook savings accounts where you had to take the passbook into the bank to deposit or withdraw money and have the interest entered into the passbook. Checking accounts were part of ACH, savings accounts were not. Savings and loan associations, a major source of home mortgages, offered passbook savings accounts only. As electronic funds transfers became more common, savings accounts began offering checking privileges, passbooks passed into history, and the differences mostly disappeared. But some legacy systems are still out there.
    – Dilip Sarwate
    Apr 15, 2012 at 2:40
  • @Dilip Sarwate - the passbook savings accounts I had a child and teen in the 80s and 90s allowed deposits into the account without the passbook - but withdrawals were passbook-only
    – warren
    Apr 16, 2012 at 14:40
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    @warren I was a child and teen in the 50s and 60s ... The point of my comment is that in the past, many banks and savings and loan associations offered savings accounts that were not part of the ACH system and couldn't accept electronic fund transfers, and there may still be small institutions that continue this practice, or handle EFTs to savings accounts differently. So, as f1studentinUS's answer indicates, checking the correct box appears to be important.
    – Dilip Sarwate
    Apr 16, 2012 at 14:51

2 Answers 2

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In the US, direct deposit is process via the Automated Clearing House "ACH", which is made up of member banks, and two (2) ACH operators (Federal Reserve and Electronic Payments Network "EPN").

When your Employer (in the case of direct deposit of payroll) or the US Federal Government (in the case of Federal Tax Return) creates an ACH credit entry for your account they need to supply multiple pieces of information to route the credit entry through the ACH network. As you stated, they do need your financial institution's routing transit number and your bank account number. They also need to set the account type (checking, savings, loan, or general ledger) customer name, customer id, etc. In short, the account type is required because the ACH file format, promulagated by the National ACH Association, mandates it. [http://www.achrulesonline.org]

Please keep in mind, that the receiving bank of our hypothetical credit entry, can still post the money to your account if the account type is set incorrectly. Ultimately, if the ACH transaction makes it to your bank, they can post it or reject it back to the originating bank. If they do post the credit to your account even though the account type was set incorrectly, your bank will probably generate a Notification of Change "NOC" ACH entry and forward it to the originator.

NOC entries are used to notify originators, such as your employer, that they need to make one or more updates to the direct deposit information they have on file for your account.

So yes, it is important that you check the correct account type box when setting up direct deposit.

For more information, you can review the ACH rules online at the following web site.

http://www.achrulesonline.org/

ACH on Wikipedia http://en.wikipedia.org/wiki/Automated_Clearing_House

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  • Nice first answer, Mr. User6229. :)
    – user296
    Apr 20, 2012 at 17:32
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Yes, I have had deposits rejected when I forgot to check that box.

I would like to know an answer why: just like you, my "savings and checking accounts have different numbers, so the box seems redundant", but my payroll deposits were rejected nonetheless.

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